into one another will give you a massive leg up not only with your options
trading but also with directional trading.
Trends
In theory spotting a trend is simple enough. Look
left to right and if the
price is headed up or down, it’s a trend. Well, sometimes it is really that
simple. However, for the majority of the
time you have both with and
counter-trend forces operating in the market. It is possible to have long
counter trend reactions within a larger trend and sometimes, depending on
the time frame you’re in, these counter-trend reactions take up the majority
of your screen space.
Trend vs. Range
This is a chart of the UK100 CFD, which mimics the FTSE 100, on the
four-hour time frame. Three-quarters of the
chart is a downtrend and the
last quarter is a wild uptrend. Using the looking left to right guideline, we’d
conclude that this instrument is in a range. Is that really true though?
Just looking at that chart, you can clearly see that short-term momentum is
bullish. So, if you were considering taking a trade on this, would you
implement a range strategy or a trending one?
This is exactly the sort of
thing that catches traders up.
The key to deciphering trends is to watch for two things: counter trend
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